* Hostile bid for Newmont seen as unlikely
* Sources says reporting structure in new entity was an
* Failed talks throw spotlight on Barrick CEO Sokalsky's
* Newmont and Barrick shares slide on the NYSE
(Recasts with comments from both companies, updates stocks)
By Euan Rocha, Allison Martell and Soyoung Kim
TORONTO/NEW YORK, April 28 Failed merger talks
between Barrick Gold Corp and Newmont Mining Corp
descended into acrimony on Monday, with the two large
gold miners publicly accusing each other of scuppering a deal
favored by many investors.
Barrick, the world's largest gold miner, landed the first
blow on Monday, saying it believed a merger would have been in
the best interests of shareholders, but that Newmont's board had
decided its shareholders' interests were best served by
Newmont, which has remained quiet for the last two weeks as
reports around the stalled merger talks swirled, issued a
scathing response, slamming its suitor and stating bluntly that
negotiations failed due to the lack of a "constructive, mutually
Shortly after midday, Barrick issued a rebuttal stating the
talks failed after Newmont attempted to renege on key terms
around a deal that had been already hammered out. Newmont
responded with yet another release saying it did not renege on a
deal and strongly disagreed with Barrick's characterization of
The failed talks hit shares of both companies, which have
large overlapping operations in Nevada.
Newmont's stock slid 6.7 percent to $24.67 on the New York
Stock Exchange, as many investors do not see Barrick attempting
a hostile bid. Barrick shares fell 3.1 percent to $17.33.
Denver-based Newmont slammed Barrick's outgoing chairman and
founder, Peter Munk, and Co-Chair John Thornton, who is now set
to succeed Munk at Barrick's annual shareholder meeting on
"While our team has found your management team's engagement
to be constructive and professional, the same constructive
nature cannot be said of our discussions with your Co-Chairman
on certain fundamental strategic and structural issues over the
past two weeks," Newmont's Chairman Vincent Calarco said in a
letter to Barrick's board made public on Monday.
Sources familiar with the situation told Reuters last week
that talks had hit a snag around the power-sharing structure at
the board level within a new combined entity.
In an interview with the Financial Post last week, Munk said
Newmont's board was not shareholder friendly. In particular, he
criticized Newmont for shutting media out of its recent annual
meeting, something he said Barrick would not do.
"That's the kind of people they are, and that's why it's so
difficult to make a deal," he said.
A source familiar with the negotiations said Munk's comments
were the last straw for Newmont's board.
In the letter made public on Monday, Newmont's Calarco said
Munk's comments indicated a lack of mutual respect or shared
values that would be necessary to realize the full potential of
a combined entity.
"Our efforts to find consensus have been rejected out of
hand repeatedly," said Calarco, adding that Thornton had refused
to budge on some fundamental strategic and structural issues.
Last week, sources had told Reuters that the two sides had
agreed to a 14-member board for the new combined entity, with
seven from Barrick, five from Newmont and two new nominees.
Newmont Chief Executive Officer Gary Goldberg was set to hold
that post at the new entity, while Thornton would become
Although most aspects of a deal had been hashed out, sources
familiar with the deal told Reuters that one of the key sticking
points was the balance of power between Thornton and Goldberg.
Thornton was set to be formalized as executive chairman when
a deal closed, and in that capacity would have had the power to
override Goldberg. Sources say Newmont viewed this structure as
problematic, while Barrick saw it as fundamental given that it
was paying a premium and giving its target the CEO role.
DELAWARE LAW PROTECTION
Toronto-based Barrick and rival Newmont have considered
merging on numerous occasions over the past two decades. The
latest breakdown in talks marks the third time within the last
seven years that discussions have fallen apart.
Newmont's latest rejection appears to leave Barrick with few
options to pursue a deal. Legal experts have said a hostile bid
for Newmont is unlikely since the company is incorporated in
Delaware, a jurisdiction that typically respects a board's right
to reject a bid it does not deem to be in the best interests of
To succeed with a hostile bid, Barrick would probably have
to wade into a long, difficult proxy battle to unseat Newmont's
board, a move many view as unlikely.
The end of merger talks also raises questions about the
future of Barrick CEO Jamie Sokalsky, who has worked there for
more than two decades.
Sources familiar with the situation had told Reuters
Sokalsky was stepping aside once a Newmont deal closed and that
he had been largely excluded from the merger discussions, which
were being driven by Thornton.
(Editing by Franklin Paul, Jeffrey Hodgson, Lisa Von Ahn and